Swiss pensions reform in question after upper chamber sticks to guns

Switzerland’s smaller chamber of parliament, the Ständerat, has passed a pensions reform package that pits it against the lower chamber and, according to one industry observer, casts doubt over the fate of the government’s pensions reform project.  

One of the main points of contention of the Altersvorsorge 2020 (AV2020) reform package is how to compensate for a lowering of the minimum conversion rate.

In September 2016, the Nationalrat, the lower and larger chamber, rejected doing this by means of a general increase to first-pillar pensions – by CHF70 (€65) a month – which was in the upper chamber’s proposal.

The Nationalrat position, and of the pensions industry, is for a drop in future second-pillar pensions to be compensated solely within the occupational pensions framework.

The advisory committee in the upper chamber has since in turn rejected the Nationalrat’s amendments and recommended re-introducing a top-up of first-pillar pensions (AHV) in the AV2020 reform draft.

Last week, a majority of the Ständerat, the chamber of representatives of the cantons, adopted the committee’s recommendation, voting against alternative proposals from minority politicians in the chamber.

The Swiss employer federation strongly criticised the Ständerat’s decision, saying the status quo would be better than the upper chamber’s proposal, while labour unions welcomed the vote.

Last week’s vote is part of the Differenzbereinigung process, during which differences between the chambers are supposed to be ironed out.

Peter Wirth, industry expert and author of a newsletter for the Swiss second-pillar group Vorsorgeforum, said the AV2020 reform package was in the middle of the Differenzbereinigung but also “in crisis”.

He said the lower chamber would have another go at the reform package in spring next year.

A mediation conference (Einigungskonferenz) will probably follow and then, ultimately, a final vote, “with a very uncertain outcome”, he added.

He cited several reasons for the Vorsorgeforum’s scepticism, saying the upper chamber had not shown itself to be prepared to compromise, and that the lower chamber could also end up digging in its heels, with the different political make-up in the chambers also complicating matters.

There are “significant” differences between the centre-left and the right on the AV2020 package, noted Wirth.

In damning criticism of the behaviour of the majority in the upper chamber, he said that, after it failed to budge on its position, it was expecting the lower chamber to compromise.

There will be renewed discussions and negotiations behind the scenes until March, he said, but, “unfortunately, at the moment, the chances of a sensible solution look slim”.

The best one can hope for, according to Wirth, is a botch job.

Hans Peter Konrad, director of ASIP, the Swiss occupational pensions trade association, told IPE it was possible that the entire reform initiative collapsed but that he was optimistic and that the association was continuing to work towards a solution being found in parliament.

“We’re of the opinion that this reform is necessary and that it must not be allowed to fail,” he said. 

Not everyone in the second pillar in Switzerland believes the reform is needed, although one source recently expressing this view to IPE said his was a contrarian one.

Konrad said that the question about the CHF70 first pillar top-up was political and that ASIP was neutral on this, focusing instead on the second-pillar aspects of the reform.

It believes that solutions can be found for the lowering of the minimum conversion rate to be offset within the second pillar.

The next steps in the law-making process are for the advisory committee in the Nationalrat to debate the upper chamber’s proposal, and then for the full lower chamber to do so.

“After that, the reform package will go back and forth in session,” said Konrad, adding that he expected a few differences to remain, including over the CHF70, and that a mediation conference was likely. 

He expects that, at the end of the day, the politicians will “get their act together” to find a solution.

“But I wouldn’t bet on it,” he said. 

The government’s envisaged timeline for the reform is for it to enter into effect in January 2018.

This would require a final parliamentary decision to be made by the end of March, to allow time for a popular referendum to be held in September 2017.